2010 Trends In Housing of Northern Virginia

TRENDS IN HOUSING

YEAR-END 2009

SECTION ONE

THE WASHINGTON METRO AREA FOR-SALE HOUSING MARKET

The Washington housing market in the 4th quar- MARKET INDICATORS
ter of 2009 continued to show signs of recovery, WASHINGTON METRO AREA
as prices rose modestly from the previous year and Figure 1 AT YEAR-END 2009

SECTION ONE
homes sold more quickly. Volume continued to pick up
due to near-record low interest rates, Federal incen-
tives, reduced prices and an improving economy.

Although unit sales volume is down 12.3% from the
previous quarter, it is up 18.9% from one year ago.

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Sales volume in the 4th quarter has contracted com-

T H E WA S H I N GTO N M E T R O A R E A F O R- S A L E H O U S I N G M A R K E T
pared to the 3rd quarter’s sales volume, likely due
to the expected expiration of the Federal tax credit
for first-time homebuyers as well as seasonality. The
Washington region continues to add high-paying jobs,
which is fostering housing demand, even as it loses
lower-paying jobs. As the national economy gains * Sales pace as of December 2009.
Pace is ratio of total for-sale inventory to current month’s sales.
traction, Washington will see burgeoning strength in Source: MRIS, Delta Associates; January 2010.
the region’s housing market. As of year-end 2009,
all four major market indicators have improved com-
pared to one year earlier. MARKET CONDITIONS
WASHINGTON METRO AREA
(See Figures 1 and 2)
Figure 2 AT YEAR-END 2009
The average price of a Washington-area home is
$376,188 in the 4th quarter of 2009. The metro-wide
price of homes sold in the 4th quarter of 2009 was
down 2.7% from the 3rd quarter of 2009, but it was
2.2% higher than in the 4th quarter of 2008. This is the
first time metro-wide prices have risen on a trailing 12-
month basis since the 4th quarter of 2007.

Prices remain highest in the Core jurisdictions of the
District, Arlington and Alexandria. The average sales
price of a Core home in the 4th quarter of 2009 is
$486,328, up 2.2% from the 3rd quarter and 2.2% 3
lower than one year ago. In the District, the average
price in December 2009 was up 14.6% from one year
Source: Delta Associates; January 2010.
earlier. In Alexandria, the average sales price in De-
cember 2009 was up 3.0% compared with December HOME PRICES BY SUB-AREA*
2008; Arlington posted price increases of 14.5% for WASHINGTON METRO AREA
the same 12-month period. (See Figure 3) Figure 3 YEAR-END 2009

The area’s Inner ring of Fairfax, Montgomery and
Prince George’s counties (and Falls Church and Fair-
fax cities) experienced price declines of 5.4% from the
3rd quarter; the average price in the 4th quarter of
2009 was $374,044, which is down 5.1% from one
year ago. Fairfax County home prices rose 12.0% from
December 2008 to December 2009. In Montgomery
County, prices climbed 4.6% over the same period;
Prince George’s home prices fell 18.1%.

The Outer suburbs of Loudoun, Prince William and *Core: DC, Arlington, Alexandria.
Inner: Fairfax, Montgomery, Prince George’s; Fairfax City and Falls Church.
Outer: Loudoun, Prince William, Frederick.

Source: MRIS, Delta Associates; January 2010.

TREND S IN HOUSING YEAR-END 2009


Frederick counties – where foreclosures led to the re- HOME SALES AVERAGE PRICE CHANGE
gion’s steepest price declines in 2006 through 2008 WASHINGTON METRO BY SUB-AREA*
– showed a slight drop over the quarter, but had the Figure 4 2003 - 2009

SECTION ONE
strongest yearly price gain of the sub-areas. The aver-
age sales price of an Outer home in the 4th quarter
is $297,544, down 0.5% from the 3rd quarter and up
11.9% from one year ago. In Prince William County,
the average sales price in December 2009 increased
22.4% from one year earlier. In Loudoun, home prices

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rose 10.8% from December 2008 to December 2009;

Frederick posted declines of 9.2% year-over-year.
(See Figure 4)

In 2009 the number of homes sold metro-wide is up
11.4% from 2008, indicating a return of buyers to the
market. (See Figure 5) *Core: DC, Arlington, Alexandria.

Home prices at the metro level in the 4th quarter of Source: MRIS, Delta Associates; January 2010.

2009 were higher than one year earlier, with Outer ju-
risdictions showing the most improvement as the only AVERAGE SALES PRICE FOR EXISTING HOUSES
sub-area with a price increase. The Core and the Inner WASHINGTON METRO BY SUB-AREA*
suburbs continue to experience a drop in prices after a Figure 5 2002 - 2009
bounce in the 2nd quarter; prices in the Outer suburbs
approximate those seen in the 3rd quarter of 2008.
Given this mixed performance, it is too early to tell
whether this market has passed the bottom, but rising
unit volume and declining days on market bode well
for recovery. We think that in the Washington metro,
the bottom has likely passed. (See Figure 6)

As buyer activity has increased, properties are selling
more quickly. For the Washington region, homes sold
in an average of 72 days, down from 81 days in the
3rd quarter and 104 days one year ago. *Core: DC, Arlington, Alexandria.
4

In the Core, time on market fell to 73 days, down Source: MRIS, Delta Associates; January 2010.

from 79 days in the 3rd quarter and 75 days one year
ago. Properties in the Core are selling at a rate slight- AVERAGE DAYS ON MARKET - EXISTING HOUSES
ly below the region’s long-term average of 76 days. WASHINGTON METRO AREA BY SUB-AREA*
Time on market in the Outer suburbs now averages Figure 6 2002 - 2009
59 days, down 11 days from the previous quarter and
down 51 days from one year ago. Homes are taking
the longest to sell in the Inner suburbs – 76 days –
down from 86 days in the previous quarter and 109
days one year ago.

*Core: DC, Arlington, Alexandria



According to Freddie Mac, the average 30-year fixed- first-time homebuyer tax credit. The November 2009
rate mortgage at the end of December 2009 was index, which is published by the National Association
5.14%, exactly the same as one year earlier. Rates bot- of REALTORS®, was 15.5% higher than the November

SECTION ONE
tomed at 4.71% in the first week of December before 2008 reading. Pending home sales signal optimism in
rising again, though they still remain low by historical the market; however, some contracts are taking lon-
standards. The rate for a 15-year fixed-rate mortgage ger than normal to settle as appraisers and lenders
was 4.45%. are grappling with a recalibrating market. The Na-
tional Association of REALTORS® affordability index
A combination of low rates and the Federal $8,000 rose 23.4 points from November 2008 to November

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tax credit for first-time home buyers has helped lure 2009. The affordability index incorporates median

many buyers from the sidelines. Although some buy- home prices, median incomes and average mortgage
ers are facing higher lending thresholds – larger down rates to broadly gauge the national homebuying cli-
payments, better cash reserves – buyer activity picked mate.
up in 2009 compared to 2008.
Lower prices continue to propel sales volume, and
Recent market statistics indicate that buyer and seller the region persists in working through its inventory
expectations are moving toward each other, helping overhang. The Washington area has an average of
to bring the market into balance. The average time 5.3 months of for-sale inventory at December 2009,
on market in the Washington area is 72 days. This down from 7.3 months’ worth one year ago. In recent
duration is slightly below the long-term average of 76 years, Washington area average prices tend to rise
days, and it is the lowest time on market since the when the ratio of inventory to sales is below 6 months’
3rd quarter of 2006. However, sellers remain discon- worth. Lender constraints may hinder a quick rise in
nected from market conditions on pricing. The aver- prices, but the gap between supply and demand is
age selling price in the 4th quarter of 2009 is 93.7% closing in the Washington area. (See Figure 7)
of list price, up 50 basis points from the 3rd quarter
but indicating that sellers are still making generous In most jurisdictions the ratio of inventory to sales fell
concessions to facilitate sales. in the 4th quarter of 2009 compared to one year ago.
Fauquier County has the highest ratio in the region
In November, the national pending-home sales in- at 9.0 months’ worth of inventory at December 2009.
dex, a forward-looking indicator of contracts signed Jurisdictions with ratios higher than last year at this
(but not settled) for previously owned homes, fell time include Prince William County, Alexandria and
16.0% from the October reading after a surge of Fairfax City. Falls Church has just 3.1 months’ worth
activity in the preceding months as homebuyers at- of inventory at December 2009, the lowest in the re-
tempted to beat the original deadline for the federal gion. (See Figure 8)
5

PRICE CHANGE AND INVENTORY MONTHS OF FOR-SALE INVENTORY
WASHINGTON METRO WASHINGTON METRO AREA
Figure 7 2003 - 2009 Figure 8 DECEMBER 2008 vs. DECEMBER 2009

*Months of inventory at current sales pace for last month in each quarter. *Pace is ratio of total for-sale inventory to current month’s sales.
Source: MRIS, Delta Associates; January 2010. Source: MRIS, Delta Associates; January 2010.



NAVIGATING THE MARKET Seller expectations remain loftier than the market,
but the gap between buyer and seller demands is
The Washington area housing market appears to be in closing. The average sales price in the 4th quarter of

SECTION ONE
recovery. Home prices in the metro are slightly high- 2009 is 93.7% of list price, the highest share in more
er than they were one year ago, and the 4th quarter than two years. Sellers continue to make concessions
shows increased volume from last year. The Federal to buyers to facilitate sales, but those concessions are
$8,000 tax credit for first-time homebuyers has been shrinking.
successful at luring reluctant buyers off the sidelines.
This tax credit, coupled with near-record-low interest Building activity in the region remains tight, as the

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rates, has continued to spur buyer activity. market is not yet expanding and lending activity is still

constrained by the national Credit Crunch. According
Steady buyer activity – especially in the lower price to the Census, the annualized number of permits for
brackets – has helped the region work through its ex- new housing nationally in November 2009 (the most
cess inventory. As a result, the ratio of inventory to recent data available) was 584,000, up 6.0% from
sales is now 5.3 months and is approaching a healthy the October number and up from the record low of
balance between buyers and sellers. Well-priced prop- 498,000 set in April 2009. The number of permits
erties in desirable neighborhoods are seeing multiple issued in November 2009 was down 7.3% from the
offers, another indication of the slowly shifting mar- number issued in November 2008. (See Figures 10
ket. As demand and supply come into balance, and 11)
we should see continued price traction in coming
quarters. (See Figure 9) The number of housing starts fell 12.4% from Novem-
ber 2008 to November 2009, as oversupply remains
A healthy apartment market is helping to facilitate a concern in many metropolitan areas. In the near
housing demand, particularly among first-time buyers. term, new-home buyers will help to work through the
The region’s stabilized vacancy rate for investment- excess inventory of existing newly built homes.
grade apartments (Class A and B) is 4.3% in the 4th
quarter of 2009, down from 4.9% in the 3rd quarter Concerns about the economy and job security con-
and at the same level as one year ago. With a nation- tinue to affect builder confidence. The National Asso-
al vacancy rate of 7.6%, Washington boasts one of the ciation of Home Builders/Wells Fargo Housing Mar-
lowest apartment vacancy rates in the nation. ket Index of builder confidence was 16 in December
2009, down one point from November and its lowest
point since June of 2009. An index below 50 indicates
that more builders view sales conditions as poor than
6

TOTAL ACTIVE LISTINGS CONSTRUCTION STARTS AND BUILDING PERMITS*
WASHINGTON METRO AREA, ALL HOUSING TYPES UNITED STATES
Figure 9 2003 THROUGH 2009 Figure 10 2000 THROUGH NOVEMBER 2009

*For privately owned housing units, seasonally adjusted and annualized.
Source: MRIS, Delta Associates; January 2010. Source: Census Bureau, Delta Associates; January 2010.



good. The index is based on three components. Two of long-term interest rates rise in the aftermath of
them – measuring current sales conditions and the sales heavy deficit spending by the Federal govern-
expectations for the next six months – fell from Novem- ment.

SECTION ONE
ber; the measure gauging traffic of prospective buyers
remained unchanged for the third month in a row. CONSUMER SPENDING GETS A
BOOST AS INCOMES RISE
Home refinancings continued to surge in the 3rd
quarter with record low interest rates, although tough U.S. personal incomes rose in November for the fifth
credit standards are still stifling volume. According month in a row, providing some confidence as con-

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to Freddie Mac’s Quarterly Refinance Review, sumers began the holiday season. Consumer spend-

homeowners cashed out $20 billion in home equity ing increased in November following a rise in overall
in the 3rd quarter of 2009. The aggregate amount personal income, according to the Commerce De-
of $60 billion that was cashed out during the first partment. Spending rose 0.5% from October, after
three quarters of the year is the smallest volume of increasing 0.6% the previous month and falling 0.6%
equity extraction over the first three quarters of a year from August to September. The Commerce report also
since 2000. The likely cause of the decline is that showed that personal income increased 0.4% from Oc-
homeowners have a smaller equity cushion. Half of tober after increasing 0.3% for three months in a row.
those refinancing in the 3rd quarter of 2009 lowered As the recession moderates consumers are spending
their annual mortgage interest rate by an average more; however, gains continue to be measured. Retail
of 110 basis points below the previous rate. Freddie sales continue to be a barometer of consumer senti-
Mac reports that among those who refinanced, 64% ment; slow improvement will not help bring about a
of prime borrowers who refinanced a conventional, robust recovery.
second-lien mortgage either kept the same principal
balance or reduced it. This figure is the highest such We expect this same pattern to hold true for hous-
share in six years. Conversely, the share of refinancing ing – a slow but steady increase in home sales as the
resulting in higher loan amounts fell to a new six-year recession gives way to recovery.
low of 36% in the 3rd quarter from 38% last quarter.
WASHINGTON OUTPERFORMS THE NATION
The Mortgage Bankers Association reported a small
increase of 1% in seasonally adjusted refinancing ap- By most measures, the Washington metro area hous-
plications from October to November. We expect ing market is performing better than most other metro
refinancings to slow dramatically in 2010-11 as areas.

7

CONSTRUCTION BUILDING PERMITS BY STATE
SELECTED MID-ATLANTIC JURISDICTIONS
Figure 11 2000 THROUGH NOVEMBER 2009

*For privately owned housing units. Through November 2009, annualized.

Source: Census Bureau, Delta Associates; January 2010.



In the Washington metro area, the Federal Housing Fi- expect that renewed demand will continue to
nance Agency (formerly OFHEO) reported a 0.3% an- yield yearly price gains, with gains first apparent
nual decline in home prices for the 12 months ending in the Outer suburbs, but extending to the other

SECTION ONE
September 2009, compared to a decrease of 12.2% sub-areas by late 2010/early 2011.
for all of 2008. FHFA reported a national average
home price decline of 3.8% for the 12 months ending THE APPRAISAL QUESTION:
September 2009. In contrast, the National Associa- CONTINUED DEBATE
tion of REALTORS reported a national average home
decline of 11.2%, and a Washington area decline of Appraisals are a key component of any home sales

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2.5% for the 12 months ending in the 3rd quarter of involving a mortgage. The appraisal – ordered by the

2009. (FHFA and NAR use different methodologies to lender – sets the market value of the house. During
calculate price changes.) (See Figure 12) the housing boom, appraisers came under fire for lax
standards, leading to overvalued mortgages. As the
From October 2008 to October 2009, Washington national housing market declined, parties on all sides
home prices fell 2.8%, according to the Case-Shiller of transactions raised concerns that it was difficult to
index, placing 5th in a tie with Boston among major accurately assess the market value of homes.
metro areas for 12-month performance. Washing-
ton placed 9th for seasonally-adjusted monthly price In an effort to increase transparency and accountabil-
gains, tied with Minneapolis, with a 0.2% price in- ity among lenders, buyers and appraisers, the Home
crease from September to October. By contrast, Phoe- Valuation Code of Conduct (HVCC) was established
nix, Las Vegas and Detroit saw annual price declines between Freddie Mac, the Federal Housing Finance
in excess of 15%. Agency and the New York State Attorney General. It
took effect on May 1, 2009; Freddie Mac and Fannie
WASHINGTON HOUSING OUTLOOK Mae will no longer purchase mortgages that do not
comply with the HVCC.
The Washington housing market has entered
the recovery phase of the cycle. We expect that The code applies to 1- to 4-unit single-family loans
a combination of continued Federal impact on sold to Fannie Mae or Freddie Mac. The HVCC aims to
the Washington housing market and a recover- establish independence of appraisers from lenders or
ing labor market will continue to bring gains to other third parties who might influence the develop-
the Washington housing market. The pace of the ment, result or review of an appraisal.
recovery may be uneven; however, in 2010, we

8

ANNUAL ESCALATION OF EXISTING HOME
SALE PRICES
Figure 12

*12-Month change through 3rd quarter.
Source: National Association of Realtors, Delta Associates; January 2010.



The Federal Housing Administration has recently
changed its policy to include modification to its ap-
praisal requirements as well. The FHA will reaffirm

SECTION ONE
its current policy regarding appraiser independence
and geographic competence. In addition, brokers
and bank employees who earn commissions on mort-
gages will be barred from ordering appraisals and ap-
praisals older than four months will not be valid.

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Since the HVCC has gone into effect many lenders are

choosing to work with appraisal management compa-
nies (AMCs) to select appraisers. Many in the industry
have found fault with the increased use of AMCs say-
ing that the resulting reduction in appraiser fees and
increase in the time it takes to complete an appraisal
have negatively impacted the market. In addition,
real estate professionals have argued that the process
for appealing valuations is too lengthy, causing deals
to collapse before an appeal can be considered.

Although the HVCC is due to expire at the end of
2010, government-sponsored entities such as Fannie
Mae and Freddie Mac may continue to require that
mortgages comply with all or part of the code.

RESPA UPDATES TAKE EFFECT

In early January new Federal rules governing mort-
gages took effect with a new standard form for Good
Faith Estimates. The update of the Real Estate Settle-
ment Procedures Act (Respa) was announced in No-
vember 2008 by the Department of Housing and Ur-
ban Development and took effect January 1, 2010.
The new rules mandate a new standard Good Faith 9
Estimate that will assist consumers in comparing loan
offers from multiple lenders. The new estimate form
requires lenders to combine all the fees charged into
one origination charge. Consumers may then com-
pare the interest rate as well as the adjusted origina-
tion charge, which includes points used to lower the
interest rate and other fees charged.

Good Faith Estimates have always existed, however
there was no standard format, making it difficult for
consumers to compare lenders equally. The Respa
update will require that lenders and mortgage brokers
give consumers the estimate form within three days of
receiving a loan application. Lenders are not allowed
to increase the origination fee from the estimate and
are also restricted from increasing other charges not
included in the origination fee such as recording
charges or title insurance by more than 10%.


SECTION THREE
POLICY SPOTLIGHT:
EXTENSION & EXPANSION OF THE FEDERAL HOME BUYER CREDIT

Congress passed legislation in early November 2009 increase from the previous tax credit legislation in-
that extended and expanded the $8,000 Federal first- come limits of $75,000 for individuals and $150,000

S E C T I O N T H R E E | E X T E N S I O N & E X PA N S I O N O F T H E F E D E R A L H O M E B U Y E R C R E D I T
time home buyer tax credit introduced in the Housing for joint income tax filers. Anyone who collects the
and Economic Recovery Act of 2008. The $24 bil- tax credit but sells their home within three years must
lion bill expanded unemployment benefits, provided return the credit.
tax benefits to businesses with operating losses, and
expanded the housing program to more buyers while The Federal home buyer tax credit has had a no-
extending the original deadline to April 2010. The ticeable impact on the housing market since its in-
tax credit portion of the bill is expected to cost $10.8 ception. The National Association of REALTORS®
billion. (NAR) has estimated that 350,000 transactions may
not have occurred nationally without the tax credit.
Under this new legislation first-time buyers will re- This figure represents approximately 7.0% of NAR’s
ceive the same $8,000 tax credit previously offered, estimated 2009 total of 5.01 million existing home
but will have until April 30, 2010 to enter into a con- sales. Locally, we estimate that 1,900 transactions
tract on a home and until June 30, 2010 to close on may not have occurred in 2009 if not for the Federal
that home. tax credit. NAR’s annual Profile of Home Buyers and
Sellers for 2009 showed first-time buyers account-
The new bill also extends the tax credit to existing ho- ing for a record 47% of national home sales, up
meowners. Current homeowners who are purchasing from 41% in 2008. It is very likely that this increase
a new primary residence were eligible for a $6,500 can be attributed to the first-time homebuyer credit.
tax credit as of December 1, 2009 if they have lived in The National Association of Home Builders estimates
their home for at least five consecutive years during that the extended and expanded tax credit will gen-
the previous eight years. erate 180,000 additional home sales nationally.

Both provisions are limited to homes with a purchase
price of less than $800,000. In addition, individuals
making more than $125,000 per year and couples
making more than $225,000 per year are not eligi-
ble. These new income limits represent a substantial

11


SECTION FOUR

ASK DELTA

Q How will rising mortgage interest rates
affect activity in the housing market?
currently. As the Fed withdraws its current level of
support that spread will likely increase, causing mort-
gage interest rates to rise.

A
Interest rates on 30-year fixed rate mortgages The Mortgage Bankers Association’s (MBA) recent MBA
fell to an historical low of 4.71% in Decem- Mortgage Finance Forecast projects 30-year fixed rate
ber of 2009 according to Freddie Mac’s weekly mortgage interest rates to increase to 5.7% by the end
survey. This is the lowest rate since the survey of 2010 and 6.2% by the end of 2011.
began in 1971. The Federal Reserve’s program to
purchase mortgage-backed securities has helped to Projected increases in mortgage interest rates coupled
hold mortgage interest rates down despite turmoil in with the expiration of the Federal tax credit will re-
the financial markets. (See Figure 14) sult in a decrease in sales and refinancing activity na-
tionally. Although the Federal tax credit for first-time
The Federal Reserve ramped up its purchase of homebuyers was recently extended and expanded to
mortgage-backed securities in 2008 to prevent the include current homeowners who meet specific crite-
collapse of the mortgage finance market. As of No- ria, this legislation will expire by April 30, 2010.
vember 2009 Federal Reserve purchase of agency
mortgage-backed securities accounted for about 80% The MBA projects that mortgage originations will de-
of new securities issued by Fannie Mae and Freddie crease from almost $2.0 trillion in 2009 to about $1.5
Mac. The Fed’s purchase program is scheduled to trillion in 2010. Purchase originations are expected
phase out during the first quarter of 2010, leaving to increase from $718 billion in 2009 to $804 billion

SECTION FOUR
government sponsored enterprises (GSEs) such as during 2010 and refinance originations are projected
Fannie Mae, Freddie Mac and Ginnie Mae without a to fall from $1.246 trillion to $693 billion in the next
government buyer and reliant on private investors to year.
purchase mortgage-backed securities.
While an increase in mortgage interest rates may slow
The Fed’s exit and concerns about the stability of the turnaround in the national market, the local im-

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GSEs may cause an increase in the spread of mort- pact is likely to be less of a hindrance due to a more

A S K D E LTA
gage rates over Treasury bonds. According to The robust increase in jobs and consumer sentiment.
Wall Street Journal, activity by the Federal Reserve has
caused these spreads to drop from approximately 2.8
percentage points in 2008 to 1.35 percentage points
12

MORTGAGE RATES
Figure 14 30-YEAR FIXED RATE

*At December 2009.
Source: Freddie Mac, Delta Associates; January 2010.


SECTION FIVE

SUMMARY DATA ON THE MID-ATLANTIC HOUSING MARKET

CHANGE IN EXISTING HOME VALUES AVERAGE DAYS ON MARKET - EXISTING HOUSES
SELECT METRO AREAS WASHINGTON METRO AREA
Figure 15 Figure 16 1996 THROUGH 2009

SECTION FIVE
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S U M M A R Y D ATA O N T H E M I D - AT L A N T I C H O U S I N G M A R K E T
Source: FHFA, GMU Center for Regional Analysis, Delta Associates; January 2010. Source: MRIS, GMU Center for Regional Analysis, Delta Associates; January 2010.

Summary: Summary:
The Washington area saw a -0.3% change in exist- The average time on the market in 4th quarter 2009 was
ing home values for the 12 months ending September 72 days, down from 81 days at 3rd quarter and 104 days
2009 (per FHFA data), ahead of the national average of one year earlier.
-3.8%.

SALES VOLUME SALES PRICE CHANGE - TRAILING 12 MONTHS
WASHINGTON METRO AREA, ALL HOUSING TYPES WASHINGTON METRO AREA
Figure 17 1999 THROUGH 2009 Figure 18 DECEMBER 2008 vs. DECEMBER 2009

13

Source: MRIS, Delta Associates; January 2010. Source: MRIS, GMU Center for Regional Analysis, Delta Associates; January 2010.

Summary: Summary:
The 2009 sales volume was 56,954 homes: 11.4% high- Prices posted strong gains in December after showing
er than in 2008. Sales unit volume in the 4th quarter increases in September and November. On a 12-month
of 2009 was 18.6% higher than in the 4th quarter of trailing basis, prices in December 2009 were 9.9% high-
2008, adding to the momentum gained in the 2nd and er than in December 2008.
3rd quarters at the height of the selling season and due
to the anticipation of the end of the Federal tax credit for
first-time homebuyers.



DISTRICT OF COLUMBIA NORTHERN VIRGINIA
HOUSING MARKET INDICATORS HOUSING MARKET INDICATORS
Figure 19 2003 THROUGH 2009 Figure 20 2003 THROUGH 2009

SECTION FIVE
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Includes: Arlington, Fairfax, Fauquier, Loudoun, and Prince William
Counties; Alexandria, Fairfax, and Falls Church Cities.


Summary: Prices rose 2.6% in the 4th quarter of 2009 Summary: The average price in the 4th quarter of 2009
from the previous quarter, and were 4.5% lower than one fell 2.6% from the 3rd quarter, and is 10.5% higher than
year earlier. Average time on market in the 4th quarter one year earlier. Time on market averaged 53 days in
is 82 days, down from 89 days in the 3rd quarter but up the 4th quarter – the lowest of any sub state area and
from 77 days one year ago. Unit sales volume in 2009 is below the regional average. Unit sales volume for 2009
16.7% higher than in 2008. is 3.8% higher than 2008 volume.

SUBURBAN MARYLAND BALTIMORE AREA
HOUSING MARKET INDICATORS HOUSING MARKET INDICATORS
Figure 21 2003 THROUGH 2009 Figure 22 2003 THROUGH 2009

14

Includes: Anne Arundel, Carroll, Harford, Howard,
Includes: Frederick, Prince George’s, and Montgomery Counties. and Baltimore Counties; Baltimore City.


Summary: Prices fell 5.5% in the 4th quarter of 2009 Summary: The average sales price in the 4th quarter of
from the previous quarter. Year-over-year prices are 2009 fell 6.1% from the previous quarter and was 7.5%
down 10.5%. Average days on market fell to 95 from lower than one year earlier. Time on market averaged
107 in the previous quarter. Unit sales for 2009 are 113 days in the 4th quarter, down from 117 days in the
25.6% higher than in 2008. previous quarter. Unit sales for 2009 are 3.0% higher
than the 2008 total.



DISTRICT OF COLUMBIA NORTHERN VIRGINIA
SINGLE-FAMILY SALES SINGLE-FAMILY SALES
Figure 23 4TH QUARTER 2008 vs. 4TH QUARTER 2009 Figure 24 4TH QUARTER 2008 vs. 4TH QUARTER 2009

SECTION FIVE
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Thousands of Dollars
Thousands of Dollars
Includes: Arlington, Fairfax, Fauquier, Loudoun,
and Prince William Counties; Alexandria, Fairfax, and Falls Church Cities.

SUBURBAN MARYLAND BALTIMORE AREA
SINGLE-FAMILY SALES SINGLE-FAMILY SALES
Figure 25 4TH QUARTER 2008 vs. 4TH QUARTER 2009 Figure 26 4TH QUARTER 2008 vs. 4TH QUARTER 2009

15

Thousands of Dollars Thousands of Dollars
Includes: Frederick, Prince George’s, and Montgomery Counties. Includes: Anne Arundel, Baltimore, Carroll, Harford, and Howard Counties; Baltimore City.




MEDIAN SOLD PRICE MEDIAN SOLD PRICE
SELECTED WASHINGTON METRO AREA JURISDICTIONS SELECTED BALTIMORE METRO AREA JURISDICTIONS
Figure 27 DECEMBER 2008 vs. DECEMBER 2009 Figure 28 DECEMBER 2008 vs. DECEMBER 2009

SECTION FIVE
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SALES BY DAYS ON MARKET
Figure 29 4TH QUARTER 2009

16



SECTION SIX

LOCAL SPOTLIGHT: THE DISTRICT

The District of Columbia was founded in 1790 and is the month of December 2009 was up 14.6% from
home to all three branches of the United States gov- one year earlier. The 4th quarter 2009 average sales
ernment as well as numerous foreign embassies and price is down 18.5% from a peak in the 2nd quarter
government agencies. Many organizations such as of 2008. The District has not experienced the severe
professional associations, non-profit firms, law firms, price volatility that many other jurisdictions in the
lobbying groups and finance firms have established metro area have during the housing crisis.
headquarters in the District in order to be near the (See Figure 30)
Federal government. The city’s resident population
is nearly 600,000 and growing; however, during the Homes in this area have sold less quickly than in the
work week the city’s population can swell to more Washington region as a whole, likely due to the high-
than 1 million as commuters from surrounding areas er average price. The average time on market in the
enter the city for work. 4th quarter of 2009 was 82 days in the District, longer
than the regional average of 72 days, but far below
The Washington metro area was recently ranked third the city’s recent high of 105 days in the 1st quarter

SECTION SIX
on a list of “2009 Best Cities” by Kiplinger’s Personal of 2009.
Finance magazine, notably for its healthy economy,
superior higher education and eclectic culture. The As of mid-January 2010, there are 1,297 actively
District continues to rank high on “best of” lists for marketing properties for sale, of which 285 are in
walk ability, employment opportunity, and healthy liv- foreclosure or are being marketed as a short sale.

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ing and has increasingly drawn a high number of “cre- There are an additional 375 homes under contract,

L O C A L S P O T L I G H T: T H E D I S T R I C T
ative class” workers composed of occupations such as of which 160, or 43%, are in foreclosure or are being
scientists, engineers, authors and other knowledge marketed as a short sale.
workers and intellectuals that are associated with a
high level of economic growth.

The average sales price in the District of $482,075 in
the 4th quarter of 2009 represented a 2.6% increase
from the 3rd quarter, and a decline of 4.5% from the
4th quarter of 2008. However, the average price for

17

AVERAGE SALES PRICE
EXISTING HOUSES - DISTRICT OF COLUMBIA
Figure 30 1ST QUARTER 2007 - 4TH QUARTER 2009



SECTION SEVEN

REGIONAL SPOTLIGHT: MONTGOMERY COUNTY

Montgomery County is conveniently located adjacent cember of 2009. The 4th quarter 2009 average sales
to the District. Incorporated cities and municipalities price is down substantially from the peak over the past
in this jurisdiction include Bethesda, Wheaton, Rock- three years in the 3rd quarter of 2007, by 34.2%.
ville, Gaithersburg, Germantown, Friendship Heights, (See Figure 31)
Takoma Park, Chevy Chase and Kensington. Mont-
gomery County covers nearly 500 square miles of The average time on market in the 4th quarter of 2009
land area and is Maryland’s most affluent and most was 73 days in Montgomery County, a decrease from

SECTION SEVEN
populous county. last quarter’s average of 87 days and below a high of
118 days in the 1st quarter of 2009. (See Figure 32)
Transportation options are plentiful due to the coun-
ty’s close proximity to the District. There are current- As of mid-January, there are 1,876 actively marketing
ly twelve Metro stations in two corridors on the red properties for sale, of which 161 are in foreclosure
line in Montgomery County. Rail link by Amtrak and and 415 are listed as a short sale. There are an ad-
MARC train is also available. Access to the regional ditional 621 homes under contract, of which 361, or

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road network is convenient with I-95, the Capital Belt- 58.1%, are in foreclosure or are being marketed as a

R E G I O N A L S P O T L I G H T: M O N T G O M E R Y C O U N T Y
way, I-270, and several other large arteries within the short sale.
county’s borders.
As of December 2009, Montgomery County has a
Montgomery County is a significant employment cen- 4.9-month ratio of inventory to sales, down from 8.1
ter with 26 large firms with 1,300 or more employees. months at December 2008. That ratio is below the
The largest employer in the county is the National In- regional average of 5.3 months and is one indica-
stitutes of Health with over 16,000 employees. Other tor of an improving housing market. However, until
large employers in the county include Lockheed Mar- foreclosures and short sales abate further, meaning-
tin, Giant Food, Montgomery College, GEICO and ful price traction is not possible. Overall, Montgomery
IBM. County seems to be at the cusp of a housing recov-
ery, though the county may see further declines in the
The average sales price in Montgomery County of short-term.
$425,636 in the 4th quarter of 2009 represented a
4.3% decline from the 3rd quarter. However, average
prices climbed 4.6% from December of 2008 to De-

18

AVERAGE SALES PRICE BY QUARTER AVERAGE DAYS ON MARKET
EXISTING HOUSES - MONTGOMERY COUNTY EXISTING HOUSES - MONTGOMERY COUNTY
Figure 31 1ST QUARTER 2007 - 4TH QUARTER 2009 Figure 32 1ST QUARTER 2007 - 4TH QUARTER 2009



SECTION EIGHT

THE WASHINGTON REGIONAL ECONOMY AND OUTLOOK

We believe the Washington metro area economy is Job Change by Sector
currently in recovery, as the worst of the recession’s
impact is behind us. Although conditions remain The top three sectors leading job growth are
sluggish, a slow recovery is underway. Government, Education/Health, and Professional/

SECTION EIGHT
Business Services – with a total of 27,000 new jobs
Payroll employment declined 15,300 in the added to the economy in these three sectors.
Washington metro area over the 12 months ending
November 2009. This represents a decline of 0.5%, The Government sector gained 17,300 jobs during
compared to the national decline of 3.5% during the last 12 months, with 76% of these jobs created in
this period. However, the region has a relatively the Federal government.
low unemployment rate and one of the strongest

|
economic bases in the country, buoyed by Federal

T H E WA S H I N GTO N R E G I O N A L E C O N O M Y A N D O U T LO O K
The Education and Health sector gained 5,200
stimulus administration. (See Figure 33) jobs in the previous 12 months, with most of these
positions in the health field.
Job Change
The Professional and Business Services sector
With 3.0 million payroll jobs, the Washington metro gained 4,500 jobs during the last 12 months.
area ranks the fourth largest job base among metro
areas, behind New York, the LA Basin and Chicago. Unemployment Rate
However, Dallas/Fort Worth follows the Washington
metro area closely. The Washington area unemployment rate is 6.1% at
November 2009, up 180 basis points from one year
Despite a net job loss of 15,300 payroll positions in earlier.
the metro area, four of the twelve sectors grew jobs
over the past 12 months. The region continues to The Washington metro area has the lowest
grow high-end jobs even as it sheds low-end jobs. unemployment rate among comparable metros and
However, it is Government hiring, rather than private compares favorably to the national rate of 10.0% in
sector activity, that is generating most of the job November 2009. The U.S. rate remained at 10.0%
creation. when preliminary December data was released.
(See Figure 34)
Washington was affected by the national recession, but
it is outperforming other large metropolitan areas. Over
the 12 months ending November 2009, more than
437,000 jobs were shed in the LA Basin and Chicago.
19

PAYROLL JOB CHANGE UNEMPLOYMENT RATES
LARGE METRO AREAS LARGE METRO AREAS
Figure 33 12 MONTHS ENDING NOVEMBER 2009 Figure 34 NOVEMBER 2008 vs. NOVEMBER 2009

Source: BLS, Delta Associates; January 2010. Source: BLS, Delta Associates; January 2010.



Coincident Index Procurement spending is projected to rise 13.2% in
2009, once the numbers are finalized, to $75.3 billion
The Washington Coincident Index, which represents in current year dollars, accounting for 53% of all Fed-
the current state of the Washington metro area econ- eral funds flowing into the area economy. This level of

SECTION EIGHT
omy, was 104.0 in September 2009, below the 20- procurement spending supports about 550,000 pri-
year average of 107.9. However, the index remains vate sector jobs.
above the low of 103.8 experienced in February.
Procurement funding will build upon already-estab-
Although the index is lingering around the level expe- lished government initiatives to increase the con-
rienced during the slowdown of 2001, it remains well centration of Federal government contractors in the

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above the level experienced during the early 1990s Washington area. While there has been some

recession. (See Figure 35) speculation about the Obama Administration
tightening the rules on government contracting,
The Washington Region’s Core Industries it is unlikely to reduce the amount spent, in our
judgment.
The Washington area’s gross regional product (GRP)
was $401.3 billion in 2008, an increase of 3.1% from Washington Area Economic Outlook
revised 2007 figures. We expect GRP in the metro
area to have edged down 0.5% during 2009, once We expect the Washington metro area economy
the numbers are finalized. to slowly recover during 2010. We believe the lo-
cal economy hit bottom during the 1st half of 2009
Approximately one-third of the Washington metro and recovery is now underway. However, we expect
GRP is generated by the Federal government – the the speed of recovery to be slow, as consumers and
region’s most important core industry. A core industry companies remain cautious.
is one that imports capital and exports a good or ser-
vice. Total Federal spending in the Washington metro We expect consumer confidence will edge up moder-
area was up in 2008 to $134.8 billion (a revised fig- ately during 2010. Consumer confidence is currently
ure from our prior reporting), a 7.8% increase from very low and will remain challenged until healthy job
2007. (See Figure 36) growth is reported.

20

COINCIDENT INDEX CORE ECONOMIC SECTORS
WASHINGTON METRO AREA IN CURRENT YEAR DOLLARS
Figure 35 1988 - 2009 Figure 36 WASHINGTON METRO AREA

Note: Figures are estimates.
* At September 2009. Procurement figures do not include US Postal Service and FAA purchases.
Source: GMU Center for Regional Analysis, Delta Associates; January 2010. Source: Dr. Stephen Fuller, Delta Associates; January 2010.



We believe GRP declined 0.5% during 2009, once the
numbers are finalized. This decline is less severe com-
pared to the national decline of 2.5%. The decline lo-
cally is due to retail spending and construction – the

SECTION EIGHT
two hardest hit industries in the metro area, which are
taking longer to recover. Conditions should stabilize
in 2010 with a GRP rise of 2.7%. This compares to the
national GDP rise of a projected 2.5%.

Given these factors, in consultation with Dr. Stephen

|
Fuller of George Mason University, we project that

21,000 payroll jobs were eliminated in the metro
area in 2009, once the numbers are finalized, and
that 23,900 jobs will be generated in 2010.
(See Figure 37)

PAYROLL JOB GROWTH
WASHINGTON METRO AREA
Figure 37 2000 – 2011

Note: Data restated since 2000 consistent with redefinition of metro area in March 2005. 21
Source: Dr. Stephen Fuller, Delta Associates; January 2010.


METHODOLOGY

SINGLE-FAMILY HOUSING DATA

Northern Virginia is defined as Arlington, Fairfax,
Fauquier, Loudoun, and Prince William Counties;
Alexandria, Fairfax, and Falls Church Cities.

Suburban Maryland is defined as Frederick,
Montgomery, and Prince George’s Counties.

The Washington Metro Area describes all of the
jurisdictions listed above and the District of
Columbia.

The Baltimore Metro Area is defined as Anne Arundel,
Baltimore, Carroll, Harford, and Howard Counties;
Baltimore City. BUREAU OF LABOR STATISTICS METRO AREA DEFINITIONS

COMMERCIAL REAL ESTATE DATA Atlanta
Atlanta-Sandy Spring-Marietta, GA

Office, Apartments, Condominiums Austin
Austin-Round Rock, TX
Northern Virginia is defined as Arlington, Fairfax, Boston
Loudoun, and Prince William Counties; Alexandria, Boston-Cambridge-Quincy, MA-NH (Metropolitan NECTA)
Fairfax, and Falls Church Cities.
Chicago
Chicago-Naperville-Joliet, IL-IN-WI
Suburban Maryland is defined as Frederick, (Non-Metropolitan Division)
Montgomery, and Prince George’s Counties.

M E T H O D O LO GY
Dallas-Fort Worth
Dallas-Forth Worth-Arlington, TX
The Washington Metro Area is defined by all of the
jurisdictions listed above, plus the District of Denver
Denver-Aurora, CO + Boulder, CO
Columbia.
Houston
The Baltimore Metro Area is defined as Anne Arundel, Houston-Sugar Land-Baytown, TX
Baltimore, Carroll, Harford, and Howard Counties, LA Basin
29
plus Baltimore City. Los Angeles-Long Beach-Glendale, CA (Metropolitan Division)
Riverside-San Bernardino-Ontario, CA
Santa Ana-Anaheim-Irvine, CA (Metropolitan Division)
Retail
New York
Northern Virginia is defined as Arlington, Fairfax, New York-Northern New Jersey-Long Island, NY-NJ-PA
Loudoun, and Prince William Counties; Alexandria, Phoenix
Fairfax, and Falls Church Cities. Phoenix-Mesa-Scottsdale, AZ

San Antonio
Suburban Maryland is defined as Montgomery and San Antonio, TX
Prince George’s Counties.
San Francisco Bay
San Francisco-Oakland-Fremont, CA + San Jose-
The Washington Metro Area is defined by all of the Sunnyvale-Santa Clara, CA
jurisdictions listed above, plus the District of
Columbia. South Florida
Fort Lauderdale-Pompano Beach-Deerfield Beach, FL
Miami-Miami Beach-Kendall, FL
West Palm Beach-Boca Raton-Boyton Beach, FL

Washington
Washington-Arlington-Alexandria, DC-VA-MD-WV
(Non-Metropolitan Division)


ABOUT MRIS AND DELTA ASSOCIATES

MRIS Delta Associates

Metropolitan Regional Information Systems, Inc. (MRIS) Delta Associates, the research affiliate of Transwestern,
is the nation’s largest Multiple Listing Service. MRIS is a firm of experienced professionals offering consulting
serves nearly 50,000 real estate professionals spanning and data services to the commercial real estate industry
Maryland, the District of Columbia, Northern Virginia, for over 25 years. The firm’s practice is organized in four
and parts of West Virginia and Pennsylvania – a total of related areas:
22,000 square miles.
• Consulting, research and advisory services for
Customers currently have access to over 66,000 active commercial real estate projects, including market
listings, an archive of 3.1 million “comparable” listings studies, market entry strategies, asset performance
and close to 5.5 million public records containing tax, enhancement studies, pre-acquisition due
assessment, and deed transfer information about prop- diligence, and financial and fiscal impact
erties throughout the region. The cutting edge technol- analyses.
ogy designed by MRIS keeps real estate professionals’
business ahead of the curve. • Valuation services for real estate companies and
fractional interests in them.
MRIS is owned by 25 Shareholder REALTOR® Associa-
tions and governed by brokers who rely heavily on input • Distressed asset recovery services to include
from the agents, brokers, and shareholders serving on property performance analyses and enhancement

A B O U T M R I S A N D D E LTA A S S O C I AT E S
vital committees. studies, debt structuring evaluation and note
valuations, portfolio assembly due diligence,
When measuring both listing and selling agent activity, valuations and litigation support.
MRIS subscribers generated more than $36 billion in
sales volume and engaged in over 102,000 transactions • Subscription data for select metro regions for
in 2008. office, flex/industrial, retail, condominium, and
apartment markets.

For more information on MRIS, please visit: Delta’s Trends in Housing team includes: Greg Leisch,
mris.com Chief Executive; David Weisel, President, Consulting
Division; Alexander (Sandy) Paul, National Research
Director; and Alyson Bode, Senior Associate.

For more information on Delta Associates, please visit
DeltaAssociates.com
30

Headquarters Headquarters
9707 Key West Avenue 500 Montgomery St.
Suite 200 Suite 600
Rockville, Maryland 20850 Alexandria, VA 22314
301.838.7100 703.836.5700

© 2010 MRIS. All rights reserved. You may neither copy nor disseminate this report. If quoted, proper attribution is required. Sources: Bureau of Economic Analysis,
Bureau of Labor Statistics, Census Bureau, Commerce Department, CoStar, Delta Associates, Department of Housing and Urban Development, Dr. Stephen Fuller and
John McClain at GMU’s Center for Regional Analysis, Federal Housing Finance Agency, Federal Reserve, Freddie Mac, Internal Revenue Service, Kiplinger’s Personal
Finance, Maryland Dept. of Business & Economic Development, Morgan Stanley Research, Mortgage Bankers Association, MRIS, NAHB, NAR, Primary Mortgage Market
Survey®, Standard & Poor’s, The New York Times, The Wall Street Journal, The Washington Post, Treasury Department, USA Today, U.S. News & World Report, Washington
Business Journal.


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